Copper futures lower on weak Euro zone data, Yellen comments support

Copper futures fell on Friday after another batch of downbeat economic data from the Euro zone dimmed the metals demand prospects in the single currency bloc. Losses were however limited following Fed Vice Chairwoman Janet Yellen’s comments for maintaining the central banks current pace of monthly bond purchases.

On the Comex division of the New York Mercantile Exchange, copper futures for settlement in December fell by 0.23% to $3.153 per pound by 12:22 GMT. Prices plunged to a day low of $3.144 a pound, near yesterdays 3-1/2-month low of $3.142, while days high was touched at $3.184. The industrial metal rose by 0.1% on Thursday but extended its weekly decline to 3.2% on Friday.

Copper was pressured after recent downbeat data from the Euro zone spurred concern over demand prospects in the single currency bloc. Eurostat reported earlier in the day that consumer inflation fell to the lowest in 4 years, spurring fears the bloc may be headed for a continuing period of deflation. The Euro zones consumer prices rose by 0.7% in October from a year earlier, meeting both projections and the preceding periods reading. Month-on-month, the Harmonized Index of Consumer Prices (HICP) declined by 0.1% after it advanced by 0.5% in September.

Core consumer inflation advanced by 0.8%, the slowest gain in more than 2-1/2 years, down from a 1% gain in September. Month-on-month, core CPI was unchanged, trailing the preceding periods 0.7% advance.

Also fanning negative sentiment for the recovery of European economies, data showed yesterday that the Euro zone’s GDP growth matched projections and slowed to 0.1% on quarterly basis, down from 0.3% in the three months through June. Year-on-year, the single currency bloc’s economy shrank by 0.4% following a 0.5% decline in the second quarter and underperformed expectations for a 0.3% contraction.

France’s economy expanded by 0.2% in the third quarter from a year earlier, trailing expectations for a 0.3% advance and the preceding three months’ 0.5% growth. Germany managed to partially offset the bad news. Year-on-year, the leading EU economy grew by 1.1% in the third quarter, beating expectations for a 1.0% expansion following the previous three months’ 0.9% gain. On quarterly basis, growth slowed to 0.3% from 0.7% in the second quarter.

Italy’s GDP reading matched expectations and marked a 1.9% contraction on annual basis after the country’s economy shrank by a revised 2.2% in the previous quarter, a preliminary estimate showed. Also fanning negative sentiment, Great Britain’s retail sales fell by 0.7% in October from a month earlier, defying projections for remaining flat after they advanced by 0.6% in September. Year-on-year, sales surged by 1.8%, underperforming expectations for a 3.1% expansion. The previous month’s gain was revised down to 2.0% from initially estimated at 2.2%.

Fed stimulus

Losses however were limited after Janet Yellen, Fed Vice Chairwoman and President Barack Obama’s nominee to lead the Federal Reserve, said at a Senate hearing yesterday she’ll press on with Fed’s massive quantitative easing program until she sees a robust economic recovery. Yellen said she doesn’t see evidence at this point that the current policy is inflating assets bubbles, further curbing speculations for an earlier-than-expected tapering of the stimulus.

“Although there is limited evidence of reach for yield, we don’t see a broad buildup in leverage, where the development of risks that I think at this stage poses a risk to financial stability,” she said.

In her prepared comments prior to the hearing, Yellen called last month’s 7.3% unemployment rate too high, noting the economy and labor market were performing short of their potential, while inflation remained well below Fed’s 2% target and provided room for easy money supply.

Brian Booth, a senior market strategist at Long Leaf Trading Group in Chicago, said for Bloomberg: “Metals got a bit of a bit of a boost from Yellen’s comments. She maintains the Fed’s stance that there’s there’s still a lot of work to do on the economy, and that they’ll probably continue to go to their bag of tricks until it improves.”